Background There is a high prevalence of psychiatric disorders in dermatological outpatients. Objectives To estimate the magnitude of this problem and to identify a set of variables associated with the presence of psychiatric disorder. Methods All adults attending the outpatient clinics of a dermatological hospital on predetermined days were given a questionnaire comprising the Skindex-29 and the 12-item General Health Questionnaire (GHQ-12). Results In total, 4268 questionnaires were given at admission, and 3125 were returned. Of these, 546 were blank or incomplete, leaving 2579 respondents (response rate 60·4%). Using a stringent cut-off threshold (≥ 5) for psychiatric case identification with the GHQ-12, scored in the conventional way, the overall prevalence of psychiatric morbidity was 25·2% (95% confidence interval 23·6–27·0%). We found a higher prevalence of psychiatric disorders in women and in widows/widowers, controlling for age. Health-related quality of life was a much stronger predictor of psychiatric morbidity than physician-rated clinical severity. High prevalence rates (> 30%) were observed among patients with acne, pruritus, urticaria, alopecia and herpesvirus infections, and in subjects without objective signs of dermatological disease. Conclusions Our study has depicted the situation that is actually faced by dermatologists in their everyday practice, where they are in a unique position to recognize psychiatric morbidity and to take appropriate measures. The GHQ-12, being easy for patients to compile and for physicians or nurses to score, may be a practical tool to increase identification of patients with substantial psychological distress or formal psychiatric disorder in order to provide more comprehensive and appropriate intervention.